How Presidential approval ratings compare to market returns

Author: Portfolio Specialist Group

September 28, 2017

Political drama receives a great deal of coverage through newspapers and business television networks, though most developments are difficult to pinpoint within financial markets. In fact, geopolitical risks historically haven’t been big market drivers over the long-term aside from initial knee-jerk reactions.

Similarly, U.S. Presidential approval ratings have largely shown no clear relation to market returns, unless they fall to extreme lows. Interestingly, since 1960, returns on average have been best in the complacent 35-50% approval rating category, where the U.S. currently stands. Only when Presidents fall below the 35% threshold do markets appear to feel the effects of dysfunction in Washington, suffering double-digit losses on average.

This measure is worth watching closely, however, as President Trump’s approval rating as of September 1st is only 36% and trending sharply lower. Facing an upcoming debt ceiling, NAFTA negotiations, continued delays on tax reform and a stalemate with North Korea, Trump’s favourability will surely be tested in the coming weeks.

Presidential approval ratings compared to DJIA Index returns

Source: Ned Davis Research, September 2017

Commentaries contained herein are provided as a general source of information based on information available as of September 11, 2017 and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and the manager accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Investors are expected to obtain professional investment advice.

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